MANILA, PHILIPPINES - The Asian Development Bank (ADB) has signed a trade finance agreement with the Bhutan National Bank Ltd. It is ADB's first such agreement in the South Asian country.

The agreement was made under ADB's Trade Finance Program (TFP), which provides loans and guarantees through banks to facilitate international trade in ADB's developing member countries.

"It's essential to help Bhutan's banks and companies to get hold of more finance to support their exports and imports, which are important to a vibrant and growing economy and which create jobs and boost incomes," said Robert van Zwieten, Director in ADB's Private Sector Operations Department.

Bhutan's economy has grown an average of 7% a year since 2000, helping to lift many people out of poverty. However, the mountainous country has a narrow economic base that relies heavily on the generation and sale of hydropower to India. With good jobs scarce and more than one-fifth of the population still living beneath the poverty line, the government aims to diversify its economy by developing the private sector - a central pillar of the government's growth, employment generation, and poverty reduction strategy.

"The trade finance agreement will help build up much-needed financing to companies, including small- and medium-sized enterprises, which will help Bhutan to diversify its economy and work more closely with other countries in the region," said Steven Beck, Head of Trade Finance at ADB.

Many banks in Bhutan's neighboring countries - Bangladesh, the People's Republic of China, India and Nepal - as well as much of the rest of Asia and the Pacific, are already participating in the program.

Through its partnership with over 180 banks around the world, ADB's TFP has supported $4.3 billion in trade since it started operating in 2004. Last year, the program supported $2 billion in international transactions - half of which were between ADB's developing member countries - and it expects to support around $2.5 billion worth of international transactions this year. ADB, which has a triple A credit rating, will continue to expand the reach of the TFP in 2011 to support intraregional trade and economic integration.